Why TVI is my #1 star for 2010

New year brings new stars. And now you will know why i picked them up. Coming soon DAN.

Have a great day


This document represents only my own opinion and is not cautioned by TVi.

My expectations are based upon available documents on the Internet and are from TVI site or approved sites. Based upon their 2009 credibility I have no doubts that there are no undisclosed matters that could affect negatively the future of this company.
I am still surprised by the quality of communication that we get from TVI. Since Ms. Benetto joined the company in September of 2009, we must admit that she did a phenomenal job in disseminating the story of TVI around the globe by all available means. This allows us to know well in advance the plans and objectives in a very transparent way. Although company must keep their secrets well-guarded, NOT ONE time was something planned that did not materialized. So for the matter of communication TVI get a 100% mark. Great communication job and great execution job from management.
They had established a plan in 2008 (that they did raise) and they had adhered to it. They were planning about 59M$ in revenue: well they did over 66M$ in 2009.
They were planning net revenue of 19M$ they probably hit the 21M$ (or very close to)
They had forecasted a mine life of 6 years at a lower drilling per day and end of September they were expecting mine life of 4.5 years. As of Dec 2009 it was 3.6 years. The mine life has reduced a bit faster than originally thought but I think the drilling pace is still at maximum allowed from government laws and over original plan. By itself it is a good thing as they will materialize more return by profiting from high metal cost that could change rapidly. One bit of negative here is that they will have to enhance mine life expectations not to return to a dead end situation and start borrowing again to restart another project. (See 2010 expectations)
Loan was a huge problem at the beginning. That loan did saved TVI from bankruptcy but they had to deal with it rapidly to avoid bleeding money to an unknown advisor at the pace of 40%. Well they did repay close to 50% of it and this was well over expectations. By the same operations, they also reduced the interest payable by a lot. They surely paid hefty penalties to do some advances repayment but overall it was worthy.
For 2009 finances realisations they get a 95% mark. Why not 100%: terms of agreement with the advisor. I will not go back to this saga and I understand that sometimes things must stay confidential and that it was a deal breaker and sometimes you cannot control every parts of an agreement that saves you from bankruptcy.
But in 2009 overall results they get a great mark of 5 starts (80% and more) and are on my list of top stars for 2010. Scores are for profitability, ebitda, following their plan, communication and future growth)
(I rank the companies I invest in every quarter and only keep the one with a rating of 80% and more)
So for 2010 my expectations are the following:
They will continue to drill as fast as they can the actual Canatuan mine even if they decrease mine life faster than originally thought.
They will use the proceeds to retire the debt within the next 3 quarters (at a rate of about 5M$ per quarter) or continue to research more affordable financing options. This way they could use the actual cash to advance faster many projects they already have on their plate.
Cash provided by operations will also be used to start the zinc recovery system that should generate about 8M$ in 2010 and advance drilling or production in the Canatuan vicinity. This could create a snowball effect: Canatuan then Canatuan vicinity then Balabag then who knows what could stop them…
I believe their revenues will be projected to be: 11 shipments of about 7.5M$ + 8M$ in zinc for a total of 90M$. Why 11 shipments and not 12? I expect a least 1 temporary shutdown either mid-march or beginning of April to allow adjustments to produce zinc. Any monthly shipment over and above already 11 is a gift. Also there will be some down time for maintenance and upgrades to the mill. I cannot see a mill working without any fault 12 months a years and 24/7. But even if they were down to 10 shipments due to lower demand or other reasons, they would still be in a great profit position.
They should get approval for additional increased throughput for the mill allowing them to go to about 2500 tons per day to process zinc and other ore from Canatuan expansion and if needed they can also apply for increase throughput.
Then based upon their new slide where they indicate a time frame for developments I would guess we will see the benefits of Dacon sometime in Q2 or Q3 and it could bring another 5-10M$ during 2010. This could be an extension of Canatuan (5-20 km in distance, (trucking distance)) where new ore drilled could be processed directly by actual mill. Based upon analysis 43-101 it is not unthinkable that the surroundings could be at least as interesting on a profit basis as the actual Canatuan is if not more if drilled properly. The key factor will be mine life extension. 10 to 15 years would be more than acceptable and I think opportunities exist to this effect if Canatuan vicinity is prospected well. Dacon would be able to supply the infrastructure needed like roads and buildings and the security and mining camps are already in place.
I would also expect mid of Q4 the start-up of Balabag mining property if drilling is complete. Could be a little optimistic and if it is the case if will go early Q1 2011. In any case well before actual Canatuan is depleted. It will start probably on a low scale but able to be finance by itself without using money from Canatuan. By itself Balabag would be a cash cow more interesting than is actually Canatuan. Based on silver and gold at 85% of what they are right now, this itself could generated about 80M$ gross revenues per year for the next 6 years.
So for the optimistic like me all combined 2010 should bring in around 90M$ actual Canatuan, 20M$ for extended Canatuan and maybe 5M$ from Balabag.
But reality will come close to a whopping 100M$ to 110M$ in 2010 for a growth of 50% to 70% and profit increase to about 40M$ close to 130%.
That is the beauty of TVI: being a low cost and profitable producer even if their revenues were to stay where they are this year, they would be more profitable due to savings from interest expenses.
Now for future growth the real thing is Tamarok. We will not get major new developments this year unless a stunning surprised like a joint venture with a Chinese partner or a company like Xstrada for example. And honestly I do not think TVI could start it up by themselves without any help by a major player as the cost involved are really too high..
By itself this project having a NPV of anything between 1,2B$ and 2,2B$ could propel TVI to the rank of a major mining company Worthing close to 1B$ when all properties are included.
Based upon all technical, 2009 results and my forecasts for 2010, TVI is now my highest ranking company in which I will be invested this year. Their scores are over those of DAN, LVS, ETFC and PXLW. (These represent my top 5 companies based upon their individual scoring)
The actual share price does not reflect (not even close) the real value of this company. Based only upon 2009 results that share price should already be in the vicinity of 0,23 to 0,34 (17M$ divided by 500M$ shares multiplied by a conservative factor of 7) and 2010 share price value would be in the vicinity of 0,63 to 0,90. What’s holding it: your guess is as god as mine. Could be the market regulator, could be day traders but I do not see any conspiracy unless a higher % of shares is traded. If only 1% of the shares would be traded in 1 day it would had to be over 4,5M shares traded. If somebody would want to go over the 10% mark, they would have to own 50M shares. Penny stock is great for penny flippers and some are making a living out of that. Viva las capitalism !
I do not expect nor am I interested in a reverse split to avoid future dilution if more cash is needed in the coming years. TVI has already diluted the share enough and any more dilution after a consolidation would destroy their image for a very long term.
I would be in favour of a 1 time dividend paid at year end 2010 for any profit exceeding their estimated net 2010. That could also mean a great thank you to the management who did a lot in 2009 to turn around that dead company into a very successful low cost and profitable mining company. They own 21% of TVI and would get 21% of the dividend.
For all those reasons, this is a great buy opportunity.

Best regards,

François